L&T EXECUTIVE DEVELOPMENT PROGRAM

September 2014

DEEPA SAHASRABUDDHE

MARKETING

CUSTOMER VALUE

MODULE 1:

WHAT DRIVES CUSTOMERS CHOICE OF VENDOR?

HIS ASSESSMENT OF VALUE

DIFFERENT CUSTOMERS DEFINE `VALUE DIFFERENTLY

SAME CUSTOMER DEFINES VALUE DIFFERENTLY DEPENDING ON SITUATION!

WHAT IS `VALUE?

An assessment, an estimate

Of Benefits versus Costs

VALUE = BENEFITS - COSTS

CUSTOMER PERCEIVED VALUE

Money

Physical Energy/ effort

Time

Mental Energy

Customer Cost

Product

Personnel

Service

Image

Customer Benefit

Functional, economic & psychological

Finding, evaluating, purchasing, using,

maintaining, disposing

HOW TO INCREASE CUSTOMER VALUE??

Increase benefits

Decrease Costs

GROUP EXERCISE ON VALUE OFFERING

MODULE 1 RECAP: CUSTOMER VALUE Value drives customers choice of vendor

Different customers define value differently

Same customer defines value differently depending on situation

Value is an assessment of benefits less costs

Hence it can be enhanced by increasing benefits or decreasing costs

Benefits are economic, functional, psychological and can be delivered through Product, Services, Image, People

Costs are for finding, evaluating, purchasing, using and disposal money, time, effort (energy physical and mental)

WHAT HAS MARKETING GOT TO DO WITH ALL THIS?

WHAT IS MARKETING?

Module 2

What does THIS customer value? And THAT one? Are they similar?

Can we sell to all of them? Should we? Some of them? Who?

DISCOVERING /

UNDERSTANDING VALUE

What benefits should we provide to them? How do we improve value by reducing cost?

What should they think of us as?

What will the product be?

What should we charge?

CREATING VALUE

How will the customer know this is what we offer? These are the benefits? How can he reach out to us?

How will our product reach the customer? And the money reach us?

COMMUNICATING &

DELIVERING VALUE

What does customer think we are good at? Falling short of?

Should we retain this customer? How?

How much can this account grow? How to grow it?

TRACKING,

MAINTAINING & GROWING

CUSTOMERS

TRACKING, MAINTAINING & GROWING CUSTOMERS

COMMUNICATING & DELIVERING

VALUE

CREATING VALUE

DISCOVERING / UNDERSTANDING VALUE

MARKETING IS .

`MEETING NEEDS PROFITABLY

Marketing is an organisational function and a set of processes for creating, communicating, and delivering value to customers and for managing customer relationships in ways that benefit the organization and its stake holders

MODULE 2 RECAP: WHAT IS MARKETING

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Segmentation & Targeting

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Value Proposition

Brand

Marketing Mix

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DAY PLAN:

Module Topic

1 Customer Value

2 What is Marketing

TEA BREAK 10.30 AM TO 10.45 AM

3 Segmentation & Targeting

4 Positioning and Brand

5 Marketing Mix

LUNCH 1 PM TO 2 PM

6 Buyer Behaviour

7 Customer Relationship Management

TEA BREAK 3.30 PM TO 3.45 PM

Consolidation Exercise

Summary

SEGMENTATION AND TARGETING

Module 3

Early in the twentieth century

Manufacturers produced high volumes of standardised goods for a mass market

FORD Model T

IN THE LATE TWENTIES THIS GAVE WAY TO

More demanding customers, product differentiation

GM Cadillac

GM Chevrolet

TODAY ......

TODAY ......

SEGMENTATION IS ABOUT

Identifying groups of customers who define value in similar ways, who share the same needs

Group together those that seek similar benefits from you

Then analyse/identify what variable captures this difference? What is the commonality that is driving the need?

SEGMENTING CONSUMER MARKETS

Demographic based on age, gender, income etc.

Psychographic based on attitude, values, approach towards life etc.

Behavioural based on the exhibited behaviours and habits of the segment

Geographic based on locations

SEGMENTING BUSINESS MARKETS

Demographic by industry size, type, location

Operating variables technology, customer capabilities (Level of service)

Purchasing approaches purchase function orientation, power structure, criteria for purchasing

Personal/account characteristics values of buyers, attitude towards risk/quality, loyalty

MANUFACTURER OF STEEL COILS AND STRIPS

1ST LEVEL

AUTOMOBILE

CONSTRUCTION

WHITE GOODS

RAILWAY WAGONS

2ND LEVEL

Vehicle Bodies

Auto-components

3RD LEVEL

Global / Indian brands

Fineblanking

Industry

End-use

Attitude

Technology

WHY DO SEGMENTATION??

NEXT, CHOOSE WHO TO FOCUS ON:

TARGETING

Segment Attractiveness Size, Growth rate, Profitability, Risk

PORTERS FIVE FORCES:

Threat of intense segment rivalry

Threat of increasing bargaining power of suppliers

Threat of increasing bargaining power of customers

Threat of new entrants

Threat of substitutes

Own Objectives, Competencies and Resources

GROUP EXERCISE ON SEGMENTATION AND TARGETING

Exercise Sheets

Segmentation is the division of the overall market into groups whose members have a similar need from the product; groups whose members define value in similar ways

Segmenting markets helps companies tailor their offerings to provide better value than if they created offerings that appealed to the `average / `mass

Target segments are those that the company chooses to focus on based on their assessment of segment attractiveness, own objectives, strengths and competencies

MODULE 3 RECAP: SEGMENTATION & TARGETING

POSITIONING

Module 4

Having identified target segments, understood what they value next step is

WHAT ARE THE KEY BENEFITS WE WANT TO PUT TOGETHER FOR THIS SEGMENT

VALUE PROPOSITION

The set of benefits that you offer to the target market in return for the associated payment

WHY SHOULD I BUY YOU?

reliability

durability

Faster operations/ lower cycle time

lower operator fatigue

assured uptime

affordable quality

Now we should be all set to create our product and launch

RIGHT?

Video

REMEMBER

RECALL

notice / register

POSITIONING

POSITIONING IS

The act of Designing and Communicating with the consumer

in such a way that your product occupies a valued and

distinct place / reputation in the minds of the target

consumer is called POSITIONING

AIM: An image or a position that is valuable to customer and

strongly associated with us and not easy for competitor to

match

POSITIONING IS

Figuring out WHAT is it that we want the

customer to remember us for, associate us

with the most

And

Doing everything to drive that message

across and retain it

Burj Al Arab worlds tallest hotel

POSITIONING METHODS

POSITIONING METHODS

ATTRIBUTES :

Largest portfolio of excavators of all sizes;

Oldest company in the business;

Most technologically advanced processes/technology;

POSITIONING ON BENEFITS

Faster (cycle time, implementation etc)

Cheaper

More efficient (Single sourcing for all your excavator needs)

SAVE 30% ON YOUR ELECTRIC BILLS

POSITIONING ON IMAGE

FINDING THE RIGHT VALUE-PROPOSITION AND POSITION

Valuable to customer

Favourable `point of difference for you - You are superior to competitor

Deliverable; supported by your strengths and competencies

Customer comprehends and appreciates

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REMEMBER ME AS THE COMPANY THAT

THE SPECIFIC BENEFITS I BRING TO YOU IN THIS CASE ARE

BRAND

Offering from an identified, known source is a branded market offering.

Brand helps the customer identify the product with a specific supplier and delineate from others. Over time it gathers meaning or brand attributes

KEY BENEFITS OF A STRONG BRAND

Helps establish credibility and is a short-hand descriptor for key benefits provided

Repository for various intangible attributes

Reduces purchaser risk and shortens decision making cycle

Shortens new product establishment time

Reduces price sensitivity

Value proposition is set of benefits

Positioning is the creating and maintaining a certain image/reputation about the brand in the customers mind

It is important to be clear about what is the positioning we want and have. Ideally it should be valuable, unique and difficult to copy.

One must make sure one focuses on maintaining the positioning promise

Building a brand delivers significant benefits over time

MODULE 4 RECAP: POSITIONING

GROUP EXERCISE ON POSITIONING

Exercise Sheets

MARKETING MIX

Module 5

THE MARKETING MIX

The tools the marketer has to make the value proposition come alive for the customer

Features and attributes

Quality

Design

Brand name

Packaging sizes and variants

Services

Warranties

PRODUCT

reliability

durability

Faster operations / lower cycle time

lower operator fatigue

assured uptime

affordable quality

German engineered crane

All components from Germany

Ergonomically designed cabin

Preventive Maintenance bundled

Vendor managed inventory of spares

Operator training

Manuals and documentation

24 x 7 helpline

Emergency repair service

BENEFITS TRANSLATED INTO THE PRODUCT

The value that is put on the exchange process

List price

Discount

Allowances

Payment period

Credit terms

PRICE

Outcome based pricing , gain and risk share pricing

Advertising

Personal selling

Sales promotion

Public relations

Direct Marketing

PROMOTION

Digital Media

PLACE (DISTRIBUTION)

Channels

Coverage

Locations

Inventory

Transport

WHAT ADDITIONAL TOOLS DOES THE SERVICE FIRM HAVE TO CREATE/CONVEY VALUE?

People

Process Physical Evidence

Contact employees Customer

him/herself/Other customers

Operational flow of activities

Steps in process

Flexibility vs. standard

Technology vs. human

Tangible communication

Servicescape

Tend to become quality proxy variables

MARKETING MIX ` INTEGRATED

PRODUCT

PRICE

PLACE

PROMOTION

PRODUCT

PRICE

PLACE

PROMOTION

PEOPLE

PROCESSES

PHYSICAL EVIDENCE

GOODS SERVICES

Value proposition has many benefits

These are made available, communicated and delivered to the customer using the marketing mix.

Physical Goods Marketing Mix is: Product, Price, Promotion, Place (Known as 4 Ps of Marketing)

Services Marketing Mix is: Product, Price, Promotion, Place, People, Processes and Physical Evidence (7 Ps of the Service Marketing Mix)

Marketing Mix can be used creatively to tailor value as per the customer requirements and preferences

Each element of the Mix has to work in consonance with the others in an integrated fashion

MODULE 5 RECAP: MARKETING MIX

GROUP EXERCISE ON MARKETING MIX

Exercise Sheets:

BUYER BEHAVIOUR

Module 6

HOW DOES MARKETER UNDERSTAND

What customer needs, values

Which is the best way to approach him

What communication will be most appropriate

How he decides what brand to buy

BUYER BEHAVIOUR

MARKETER UNDERSTANDS AND TRACKS

Macro economic factors :

Political, Economic, Socio-Cultural, Technology and Environmental & Legal (PESTEL)

Micro economic factors

Competitors, Channel, Customers, Other stakeholders

Cultural, Social, Personal Factors

Nationalities, religion, reference groups, age, lifestyle

Sources of information Internal Records (Market Information Systems) Market Intelligence Systems (Secondary and primary)

MARKETER UNDERSTANDS BUYING PROCESS & HIS ROLE AT EACH STAGE

Problem Recognition

Information Search

Evaluation of alternatives

Purchase Decision

Post Purchase Behaviour

What triggers the need /creates motive & use it

Identify info sources; their role & importance. Mktg communication should address these.

Understand evaluation criteria, method, performance of self and competitors

Vendor, Qty, Payment mode preferred

Track satisfaction, address complaints, stimulate use frequency / replacement

BUSINESS BUYING IS DIFFERENT

Fewer, larger buyers. Wider range of order sizes.

Professional purchasing

Several buying influences buying centre

Multiple sales calls, longer sales cycle

Derived demand (demand is derived from ultimate demand of consumers)

Inelastic demand - organizations do not buy more if prices fall

Geographically concentrated buyers possible auto hubs (Pune, Chennai, Gujarat)

Close supplier-customer relationships

Importance of personal relationships

BUSINESS BUYING BUY CLASSES (buying

situations):

New task

Modified Rebuy

Straight Rebuy

STEPS IN BUYING: Problem Recognition

General Need Description

Product Specification

Qualified Suppliers

Proposal solicitation and Selection

Specify Order Routine

Purchase & Use

Performance Review

BUYING CENTRE: Roles involved, people and the benefits they seek

Ensuring benefits are communicated effectively, efficiently, to the right persons/roles

COMMUNICATING EFFECTIVELY : BENEFIT STACK APPROACH

TYPICAL CUSTOMER BENEFITS OFFERED

Highly competitive prices and quality

Manufacturing plants in four continents

Net based order and tracking system & billing

24x7 help line facility

JIT delivery and customisation

Ability to handle specs. changes with 12 hr notice

Emergency deliveries on holidays and weekends

TYPICAL BUYING CENTRE MEMBERS

Purchase Manager

Plant Manager

Logistics Manager

Marketing Manager

Supply Chain Manager

CFO

COO

CEO

To track changing needs marketer needs to understand buyer behaviour & changing market:

Consumer/buyer behaviour is influenced by Marketing Mix as well as Political, Economic, Socio-Cultural, Technology and Environmental & Legal trends (PESTEL). So marketer tracks these Macro-economic factors.

Buyer behaviour is also influenced by factors like competitors, channel, customer, other stakeholders. Consumers Social / cultural/ personal traits affect consumer behaviour. Marketer tracks these Micro-economic factors

Market Sensing data comes from multiple sources including Market Information Systems and Market Intelligence Systems

B2B differs from B2C in many ways including purchasing process, complexity & cycle times and people involved

Important to: Identify the buying centre members, roles, what benefits they seek AND communicate relevant benefits to them.

MODULE 6 RECAP: BUYER BEHAVIOUR

CUSTOMER RELATIONSHIP MANAGEMENT

Module 7

WAYS TO GROW BUSINESS

ACQUIRE NEW ACCOUNTS

GROW EXISTING ACCOUNTS HOW??

WHAT IS SATISFACTION?

Feeling of pleasure or disappointment

resulting from comparing a products

perceived performance with own

expectation

WHO FRAMES EXPECTATIONS?

Past experience

Promotional claims made by the company

Media reports

Word of mouth influences (including social media chatter)

HOW DO WE TRACK SATISFACTION?

VoC programs (surveys, helpline data, scan social media, active customer interactions).

Key questions to ask: Satisfaction level for various parameters, Likelihood of re-patronising, Likelihood of recommending. Challenges?

NPS net promoter score

Analyse for insights and implement changes

WHY SATISFY CUSTOMERS?

They buy more frequently

Spend more on each occasion

They tend to be easier to serve hence `costing less

They are less price sensitive, hence higher margin possibilities

Cost of marketing to them goes down over time

They give you positive word of mouth

They are positively disposed towards new products/extensions you introduce

They are open to up-sell and cross-sell

What is the objective of `satisfying the customer?

Who is a LOYAL customer?

Is satisfying the customer enough to bring loyalty?

CUSTOMER ENGAGEMENT DRIVES LOYALTY

LONG TERM, RELATIONSHIP

CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

Process of moving toward long-term, cost-effective, mutually beneficial trust with select customers is relationship marketing and implementing this is CRM

Involves collecting, analysing and using detailed information about customers to improve their experience with us across their entire engagement with us from pre-purchase to post.

WHO ARE THE `SELECT CUSTOMERS?

High Customer Lifetime Value

`Cost Magnets - Volume Customers

Marquee Value (Benchmark customers)

`Inspiration; `Learning; `Pioneer Value provider customers

STRATEGICALLY VALUABLE CUSTOMERS

Experiences drive

Engagement

WHO IS AN ENGAGED CUSTOMER?>

WHAT IS EXPERIENCE? LETS GO FOR SOME COFFEE ..

EXPERIENCE IS

Sum total

Of Actions, Thoughts, Feelings

Through the entire customer journey Need

recognition to disposal

Journey is made up of multiple contact/touch-

points

Not each contributes equally to overall perception

But each has the potential to be a moment-of-truth

EXPERIENCE IMPRESSIONS INFLUENCED BY

Functional Goals

EASE

PLEASURE

INDIVIDUAL EXERCISE ON BRAND CONTACT

Caselet

Understand the customer journey and the brand contact opportunities

Look beyond functional goals

Reduce customer effort; improve Ease of Doing Business; processes, interactions, information, documentation

Identify / build `pleasure opportunities and capitalise

Provide positive, seamless, memorable experiences time after time

Be customer-focused not product-focused: The four Cs customer solution, customer cost, customer convenience, customer communication

TO GROW CUSTOMER ENGAGEMENT

Important to retain and grow accounts since it is far less expensive, more sustainable to do so

CRM focuses on retaining and building customer accounts through deep understanding of the customer

Satisfaction is necessary but not sufficient

Customer engagement is a vital link to loyalty

To build engagement look at providing experiences that are Positive, Seamless, Memorable, Time after time

Do this by focusing on more than functional goals looking at reducing any undesirable effort customer has to put, improving ease of doing business at each stage of the journey, meeting individual goals to build emotional engagement

MODULE 7 RECAP: CUSTOMER RELATIONSHIP MANAGEMENT

IN SUMMARY

Marketing is not only about Advertising and Promotion.

It is about knowing who is your key customer(s)

Know what is their definition of value (discover)

Decide what is the value you will deliver, what is the positioning you take and the brand promise you are making

Have this as a shared understanding across organisation so each one knows what is the customer-promise

Construct market offering, price and delivery channel to reflect this understanding

IN SUMMARY Communicate effectively showing customer you

understand his concerns and are addressing them (marketing collateral, proposals, interactions)

Plan the customer experience along entire journey to fulfil functional needs with ease and pleasure

Improve the journey from Ease of Doing Business perspective processes, interactions, documentation

Have effective VoC programs to capture, analyse for insights & Dis-seminate the information to those who need it / can use it

Do account/customer centred business planning

Key is to be customer-focused and build customer engagement

Marketing and customer engagement are not done only by those in the Marketing and Sales department.

YOU play an important role in it too in understanding value, building & delivering it in the products and services and living up to the brand image of the company in everything you do!

BEST OF LUCK!